Inflation, forex shortage frustrate telecoms network expansion

THE Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) says inflationary pressures coupled with the prevailing foreign currency shortages are hampering network expansion projects by players in the sector.

In a sector performance report for the first quarter ended March 31, 2020, Potraz said foreign currency shortage has affected network deployment and maintenance as spare parts, equipment and vendor support fees require foreign currency. The situation has been compounded by the credit crunch and high cost of international Internet connectivity, which remains a challenge as Zimbabwe is a landlocked country with difficulties in access to bandwidth from undersea cables via Mozambique and South Africa. The performance of the sector, thus, continues to be dependent on the economic environment, says the regulator.

“The economic environment impacts the sector through service demand and consumption levels, operating costs and investment.

“Given the current inflationary pressures in the economy, operating cost containment will be more crucial for operators to maintain profitability, as the growth of operating costs poses a threat to operator viability,” said Potraz.

It said data and Internet services will continue to drive industry growth given the shift towards telecommuting and e-learning, which accelerate the voice-data substitution.

“The social distancing measures introduced to avoid the risk of exposure and spreading Covid-19 will see an increased usage of Information Communication Technologies as people avoid physical contact and resort to conducting business online,” Potraz said.

The authority noted that the use of Over-the-Top services, such as WhatsApp, Skype and Viber, is expected to grow in the present economic environment as consumers cut back on communication expenditure.

There has also been a notable decline in letter volumes due to substitution of paper communication by electronic methods. As such, during the quarter under review, postal and courier service declined by 1,1 percent to record 1,3 million items from 1,4 items recorded in the fourth quarter of 2019.

Mobile money transactions declined by 5,9 percent and 14 percent in the value of cash-in and cash-out transactions respectively.

“This is attributable to the cash shortages in the economy. On the other hand there was considerable growth of 136 percent and 130 percent in the value of cross-network and online bill and merchant payments respectively,” reads the report.

Potraz also indicated the quarter under review registered growth in the total number of active mobile subscriptions, which increased by four percent to reach 13,7 million from 13,2 million recorded in the relative period last year, hence the mobile penetration rate increased by 3,6, percent to reach 94,2 percent from 90,6 percent.

The active fixed telephone lines declined by 1,8 percent to record 260 959 from 265 734 recorded in the fourth quarter of 2019 while the fixed teledensity remained at 1,8 percent. Fixed telephone subscriptions have been fluctuating over the years owing to the increased adoption of VoIP and mobile telephony by corporates and households alike.

Potraz said active internet and data subscriptions also declined by 2,5 percent to record 8,6 million from 8,8 million recorded in the previous quarter. “As a result, the internet penetration rate
declined by 0,7 percent to reach 59,1 percent from 60,6 percent recorded in the previous quarter.

“The overall decline in data and internet subscriptions is attributable to the 2,6 percent decline in active mobile internet and data subscriptions. This may be attributable to the increase in the prices of in-bundle data packages during the period,” it said.

During the period under review, the telecommunications sector also registered a decline in total fixed voice traffic, which fell by 6,9 percent to record 112,1 million minutes from 120,35 million minutes recorded in the fourth quarter of 2019.

Meanwhile, total voice traffic processed by the mobile networks also declined by 4,7 percent to record 1,33 billion minutes from 1,4 billion minutes recorded in the fourth quarter of 2019.

“The period was characterised by growth in revenue generated by the mobile telephone networks, which grew by 26,2 percent to record $2, billion in the first quarter of 2020 from $1,65 billion recorded in the fourth quarter of 2019.

“However, mobile network operating costs grew by 46,1 percent to record $1,4 billion from $988, 2 million recorded in the previous quarter. Internet Access Protocol revenues grew by 49,6 percent to record $754,3 million from $504,1 million; operating costs by IAPs also grew by 80 percent to record $749,4 million from $416,3 million,” said Potraz.

Fixed telephone revenue grew by 23,6 percent to record $308,9 million in the first quarter of 2020 from $250 million recorded in the fourth quarter of 2019.

Operating costs by the fixed network also grew by 4,7 percent to record $249,2 million from $228,5 million recorded in the previous quarter. —chronicleoc.z

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